What Can an Insurer Do When the Insured Won’t Play Nice?
One of the most vexing issues for liability insurers is what to do with an uncooperative insured. While it doesn’t happen often in the professional liability arena, when it does, it can cause major headaches, because the stakes are usually high. So, what is an insurer to do with a doctor who refuses to attend a deposition or trial, even at the insurer’s expense? The insurer can threaten to disclaim coverage based upon non-cooperation. That will get the attention of most insureds, at least those with assets at risk, but what about insureds who are judgment proof? It can be difficult in most jurisdictions, including Massachusetts, to disclaim coverage for lack of cooperation, absent very diligent efforts to obtain the insured’s cooperation. See, e.g., DiMarzo v. American Mutual Ins. Co., 388 Mass. 85 (1983).
But, if the exposure is significant enough and the insurer doesn’t think it can defend the case without the insured, it might still consider raising non-cooperation and launching a pre-emptive strike. That is what the insurer did in ProNational Ins. Co. v. Weinberg, et al., Case No. 4:06CV0117AS, pending in the U.S. District Court for the Northern District of Indiana.
ProNational brought a declaratory judgment action against the patients/plaintiffs who had sued its insured, and against the insured who had fled the country. The underlying lawsuits asserted that the insured conducted unnecessary and/or negligent surgeries. ProNational alleged that the insured’s “refusal” to participate in his defense has caused “manifest prejudice” to ProNational’s ability to defend the underlying lawsuit. The insurer seeks a declaration that the insured’s intentional disappearance to evade the consequence of the multiple claims against him is a breach of the policy and relieves ProNational of its defense and indemnity obligations.
This pre-emptive strike is an unusual but interesting tactic. The declaratory judgment action may provide a vehicle for resolving the claims before the insurer is faced with multiple default judgments. On the other hand, the insurer may be intent upon testing the limits of an insured’s duty to cooperate. In any case, this case bears close watching as it progresses.
Steven L. Schreckinger
Posted In: Duty to Cooperate